As the Indian market in chemical, pharmaceutical and biotech industries continues its accelerated growth curve towards a more ‘mature’ stage, we are seeing projects complete, priorities change and facilities relocate or close. In this article, Krishnamoorthy Vishwanathan, Managing Director, EquipNet India, a wholly owned subsidiary of EquipNet Inc., the global leader in this field, shares a case study of how a pioneering whole-business approach helped a multinational pharmaceutical company with the lead-up to a complete site demolition, involving asset redeployment and the sale of surplus manufacturing equipment.
Industry surveys suggest that on average, 10 per cent of a manufacturing company’s global asset base is lying idle at any one time, as projects are completed or the emphasis of the business shifts. Similarly, as companies merge and relocate or close facilities, equipment can fall out of use and become surplus to requirements. Asset management best practice has evolved over recent years and forward-thinking managers are increasingly aware of the hidden value that is sitting in their facilities. However, in order to achieve maximum return as assets are relocated within an enterprise or sold on, there is a requirement for a managed asset program requiring discipline, robustness, flexible processes and, perhaps most of all, industry know-how and expertise in valuing and selling the specialist equipment used in industry.
Let’s consider an on-going case-study of EquipNet India’s work. A multinational pharmaceutical company required support for the demolition of a cephalosporin manufacturing facility on one of their sites. Ahead of the demolition phase, the company had to dispose of all its formulation equipment. Prior to signing the project mandate to EquipNet India, the company had advertised all surplus assets in trade publications for disposal but had not received any attractive offers. With limited time to liquidate their assets, they decided it was time to call in the experts. The results: the project was completed successful to the timelines required and the company realised an impressive Rs 6.2 million for asset sales, and a further Rs 4 million for the demolition – 14 per cent higher than the target mandated.
The route to a successful asset management system changes depending on the final aim of a client. Some wish to dispose of their asset base as quickly as possible – as was the case in the project described here – while others place more importance of achieving the best possible return on their initial investment. As one of the preeminent vendors in this field, EquipNet provides a holistic approach to surplus asset management that balances the needs across an entire global enterprise. This is effectively illustrated using its ‘Value Control Model’ (figure 1) that combines internal redeployment, sales and disposal to deliver a consolidated service that meets the company’s requirements.
For this company, it was all about disposing their assets as quickly as possible in the lead up to demolition of the facility. Therefore, the mandate offered two alternatives for the execution of the project; either all equipment had to be broken down and sold as scrap in a time frame of 60 days, or the equipment could be sold as individual assets or as a lot exclusively to other cephalosporin manufacturers in a time frame of 60-90 days. If the latter choice, everything would have to be decontaminated and thoroughly cleaned ahead of dispatch to a new owner. Within the framework of the agreement, it was also agreed that a small amount of equipment would be donated to educational institutes in line with the company’s corporate social responsibility policy and practice. Once all equipment had been dispatched, the manufacturing block would be demolished and all associated electrical cables, steam water pipes, fire hydrants, ETP etc., could be removed to complete the handover.
EquipNet conducted an email campaign to around 200 targeted customers across India who were interested in cephalosporin manufacturing and had their own dedicated facility. A further group potential customers were contacted via phone, while also advertising in targeted pharmaceutical trade publications to attract an appropriate audience. The company received offers from various buyers, out of which around 20 were shortlisted. Following a negotiated sales process, 4 buyers were finalised for an individual lot purchase of 182 pieces of equipment. A further 16 pieces of equipment were donated to educational institutes.
Considering all options
This case study demonstrates one specific asset management program; however, there are other approaches that companies can use to meet their needs. Having made a significant investment in evaluating, selecting and purchasing a piece of equipment, redeployment to another part of the business when its initial use is over is often seen as delivering the highest on-going value for that asset. If redeployment is not an option, then a laboratory will typically look to sell-off the surplus equipment. The ‘mechanics’ of a sale may have become more straightforward with the rise of the internet, which allows instrumentation to be sold to purchasers worldwide. However, considering the complex and highly specified equipment often found in laboratories, it cannot be denied that having the personal touch of an expert can still be a real benefit. A brokered sale relies on the skill and expertise of the sales partner, where product knowledge and industry connections add significant value to the process.
When time is limited, an auction is a dependable tool for moving equipment. Designing and managing such an event can be complex, relying on several factors. EquipNet are able to advise customers on the right approach in this process, whether it be a live auction, a webcast event, sealed bid or private treaty sale. Independent of the format of the auction type, innovation and expertise should be applied by your partner in the process. EquipNet’s proprietary system - SmartAuctions™ (Figure 2) – gives buyers multiple chances to win and sellers more flexibility in approving bids.
In any business, there are occasions where clearance is the best route to realise value from some equipment. This can be done through a programme of donations, scrap and environmental recycling.
Summary
Choosing when to invest internal resource in a specific activity and when to seek extra help is a tough but essential management task. Defining and focusing on core company strengths and recognizing the need for expert support in other areas ensures operational efficiency and can have a major impact on the bottom line.
Surplus asset management is being recognised as increasingly critical, and many realise that they do not have the resource or skill base to tackle the issue in-house. With dedicated companies offering services to alleviate the burden, asset management is now joining the list of activities ripe for outsourcing.